On Monday, the House of Commons finance committee approved two amendments to the Budget Implementation Act, which sector advocates say alleviate most of their major concerns about how the government is proposing to legislate funding relationships between charities and non-qualified donees. 

“Really substantial progress has been made,” said Bruce MacDonald, CEO of Imagine Canada, of the amendments. “We’ll wait and see what the CRA guidance looks like, but it’s pointed in the right direction.” 

The amendments come on the heels of three weeks of sustained advocacy on this issue, which brought a dozen charity sector representatives to Ottawa to make the case to MPs for legislative changes. 

The two approved amendments both relate to one section of the previous legislation, which advocates say was overly prescriptive and not aligned with “the spirit” of Bill S-216 — a senate bill on the same topic that had been in the works for over two years. 

The pair of previous clauses, now rejected by the finance committee, would have prescribed in law how charities had to ensure non-profits or grassroots groups used their donations accountably. 

It would have required, for instance, that non-qualified donees — organizations without charitable status, such as activist groups, non-profits or organizations in the global south — be willing to share their accounting, related to the use of the donation, with their charitable funding partner on-demand. It would have also required non-qualified donees to provide their charitable funding partners with an annual written report detailing progress on the grant’s intended objectives. 

The pair of amendments eliminates these specific requirements, which advocates say required a cookie-cutter approach to relationships that require flexibility. 

Instead, the new language requires simply that a charity who funds a non-qualified donee must maintain “documentation sufficient to demonstrate” the purpose of the donation and that the money is spent by the donee on nothing but charitable activities that are aligned with the funder’s own charitable purposes. 

NDP MP Daniel Blaikie, who proposed one of the two approved amendments, said on Monday that the new language “strikes a good balance for the need for accountability on the one hand and the need for some more flexibility than the charitable sector has enjoyed in the past.” 

Senator Ratna Omidvar, who has led the push on Bill S-216, said she is “incredibly gratified” to see the changes. 

She said she also anticipates that the CRA will issue further “guidance” to charities about the government’s expectations for accountable dealings with non-qualified donees. Guidance documents are written by the CRA and explain the requirements of the Income Tax Act in plain language. Omidvar said it’s preferable that the specifics of funding accountability be left to the guidance documents rather than be written into law, as it will allow for greater flexibility. 

“If this bill had been passed as drafted, the law states that if you do not follow it, your charitable status can be revoked. That is mega, mega, mega serious for the sector,” she said. “Whereas if it’s in the guidance, it’s open to nuance, interpretation and context.”  

MacDonald said that changing guidance is also easier than changing legislation. 

Yet, despite the bright spots, not all of the concerns raised by sector advocates were alleviated by the two amendments. 

Participation in ‘pooled funds’ may still be offside

For one, “direction and control” is not dead, according to MacDonald. 

Currently, the Income Tax Act requires that a charity devote all of its resources to “charitable activities carried out by the organization itself.” Sector advocates say this “own activities” test has prevented many organizations from working with non-profits and grassroots groups. 

Bill S-216 proposed to scrap the “own activities” language entirely, giving charities full-reign to run their own programs and make resources available to non-qualified donees so long as they were working within the bounds of the funder’s charitable purpose. 

The BIA however, retains the language of “own activities” — “the nugget on which direction and control was built,” said MacDonald — instead adding to it a provision that allows charities to also make donations to non-qualified donees. 

MacDonald said this leaves much to be determined by the CRA’s guidance documents. 

“What we’re hopeful here is that on this particular stream, that the way that guidance will unfold will not be a direction and control regime the way we have seen it in the past,” MacDonald said. “But the actual ability to do it still is there.” 

A second aspect of the current legislation also remains vexing for some. 

On Monday, Conservative MP Phillip Lawrence proposed a third amendment on “directed giving” that was opposed by Liberal and NDP MPs and did not pass. 

The failed amendment raises concerns for two main constituencies — individual donors keen to make donations through a charity to a non-qualified donee; and organizations keen to participate in “pooled funds.”

Explaining the former, Lawrence said that the BIA legislation will impede an individual donor who wants to give funds to support a Ukrainian orphanage (a non-qualified donee) through a Canadian charity, such as the United Way. (MacDonald said this may pose a bigger concern for donors making big gifts, as donors making $50 or $100 donations don’t regularly have a say in where a charity directs their dollars.)

Carelle Mang-Benza, policy lead for Cooperation Canada, an association of international and global development charities, said that BIA clause will also make things “very difficult” for international charities who are keen to participate in “pooled funds” that support non-qualified donees. 

This is a common practice in international development work, where a group of funders will “pool” their collective resources to identify and support a group of organizations. By definition, the vast majority of the organizations foreign funders wish to support, who are operating in the local context, are non-qualified donees, as they do not have Canadian charitable status. 

This legislation as written, she said, would continue to be a barrier for Canadian charities looking to participate in these collective funding initiatives. 

Omidvar too said she was disappointed that the amendment did not pass. 

She also said, however, that officials from the Ministry of Finance have provided her staff with assurances that this aspect of the law would be applied with a “light touch.” 

Further, all three charity advocates, MacDonald, Omidvar and Mang-Benza said there is much to celebrate about what took place on Monday. 

“Seeing the Bill now amended in line with the sector’s recommendations is a testament to the government’s willingness to attend to the sector’s concerns. This needs to be wholeheartedly celebrated,” said Mang-Benza. 

Omidvar agrees. “I’m not in the business of seeking perfection,” she said. “We found a route, we all agreed on it. And kudos to the sector for mobilizing the way they did. 

“Someone will write a book about effective activism and advocacy and this will make an excellent case study.”

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